Tech Sector Leads Gains as S&P 500 Beats Expectations—but CEOs Hesitant to Raise their Outlooks

Wall Street earnings season is delivering massive beats with more than 80% of S&P 500 companies topping estimates.

But despite blended earnings growth near 50%, we are seeing a guidance gap.

CEOs are beating their quarterly numbers but refusing to raise their outlook amid the escalating Middle East conflict and surging energy prices.

Now the only sector ignoring that caution is tech driven by a relentless AI cap now.

This is a big week for earnings as well as economic data and of course the FOMC meetings.

So joining me to weigh in is Michael Reinking, Senior Market Strategist at the New York Stock Exchange.

Well, Michael, good morning.

Thank you so much for joining me.

Morning, Rammy.

Thanks for having me back.

Well, hard to believe, but it's the final week of April, and that means we get a lot of data points as well as headlines that are expected given that the Fed meeting is kicking off.

So how are you entering this week?

Yes, look, I mean, markets have had a pretty massive move over the last couple of weeks, right?

I think, you know, we're kind of last week we started to see a little bit of consolidation.

I think there's some more of that that needs to kind of happen.

You know, as you pointed out, earnings have been really, really strong to date, but we have a little bit of a bifurcation, right?

So you highlighted that guidance gap, right?

We're seeing a lot of companies that are coming out beating Q1 estimates but not necessarily kind of raising their guidance, you know, kind of taking the conservative approach given the uncertainty that we have in the current kind of macro and geopolitical backdrop.

But one area of the market that has clearly doesn't need to show any of that restraint is anything that's kind of related to AI, the demand for the build out of data centers, kind of semiconductors.

We are now even seeing kind of the strength within semiconductors move beyond just kind of the high performance silicon chips that were powering LLN. more kind of analog chips and chips that are used in other components within data centers, we've seen 18 consecutive days of strength in kind of the semiconductor index.

We have a pretty big component that's trading higher this morning in Qualcomm, suggesting that we might be on track for number 19.

And then we have kind of the mega cap tech earnings this week which are going to be kind of a very big driver and you know investors are going to be listening to kind of how they talk about kind of CPE guidance going forward. and as you mentioned, semis are an area that we continue to monitor and we could get another day of gains given that rise in Qualcomm shares this morning.

But it is a Super Bowl week for the markets, given the fact that we got key economic data on the US economy and of course it is a big week for global central banks, not just the Federal Reserve, but of course we're paying attention to Wednesday that's going to be a big, big day as well as evening.

So what are you paying attention to from the central bank? look so so I mean.

Nobody is really expecting any major kind of movement from a monetary policy perspective from the Federal Reserve.

I think the big question that markets have right now, this is expected to be kind of Fed Chair Paul Swanson as chairman.

The question is whether or not he decides to stay on as governor through the remainder of the term that he has there.

That's kind of the big question.

I don't really have any great insights into kind of where he comes out kind of on that.

On that front, but from a monetary policy perspective, they are going to be they are going to keep rates unchanged.

It will be interesting to hear his perspective in terms of how the environment is shaping up.

I'd say economically if you look at the mix of the economic data and what we've heard from management teams, right, we've seen Q1 has been pretty strong, so we expect to see kind of a decent Q1 GDP number later this week and then.

The bigger question has been what happens in the wake of this move higher that we've seen in energy prices as that kind of feeds through and early data suggests if you look at kind of the survey data that we got from the PMIs last week and Empire and Philly Fed that we're seeing a little bit of a pull forward of demand potentially as people.

Companies are kind of expecting some price increases later in the year, right?

So you're seeing some pull forward in demand.

So in some ways it may actually be accelerating the economy here in the near term.

The question is what happens as we get to the back half of this year.

We'll get the ISM manufacturing numbers on Friday.

So that's also kind of another big piece of economic data.

Yes, and you mentioned energy and we can't deny the fact that oil prices remain elevated whether we're talking about WTI or Brent, and hard to believe, but this Friday is already May, and that means driving season for Americans given Memorial Day is right around the corner.

That is something that we're monitoring and we know that C-suite executives are also monitoring the situation in terms of inflated energy prices.

For Americans who are watching right now, what would you say to them as we head into the look, the situation in Iran remains pretty fluid and dynamic.

We're at kind of a standstill currently.

The longer this goes on, right, the bigger the impact that we're going to potentially see kind of on the feed through of kind of higher energy prices from.

Market perspective, it's been pretty impressive that you now looking at ICE rent and WTI prices that have completely reversed the move that we had after the ceasefire right so we're back near the highs again, yet equity markets are holding up pretty well and I mean a lot of that has to do with that kind of the strength in tech that we just kind of talked about, but markets in. and the other more cyclical areas in the market have also kind of held up pretty well, right?

So we're kind of watching to see if there is any sort of breakthrough.

There's a lot of kind of reporting and talk about the idea that the blockade is not allowing kind of oil to get out of Iran and they are kind of coming up.

To the point where they run out of storage, which would then theoretically kind of really impair their oil wells when when you kind of have to kind of stop drilling that has a longer term impact, right?

So there is some idea that we're kind of coming up on a point where they're going to need to kind of make a decision here from a longer term perspective and so that's kind of.

Where we stand in terms of Iran and we'll see if we kind of hit a breaking point in the next week or two.

Yes, a lot to keep our eyes on, Michael.

But finally, before I let you go, I do want to talk about levels for the S&P 500.

So this morning we are nearly flat with the index in terms of futures below the flat level, but we saw record gains for the S&P 500 last week.

So where do we go from here in the short term?

Yes, look, I mean, so I think you know we're In for a little bit of consolidation, I think would make sense and be healthy for the markets.

I mean there's not really any resistance when you are at all-time highs.

There's no kind of overhead resistance to really worry about from that perspective.

I think you're kind of looking for some support in around 7, 7100 as we pull back, we've held that 7100 level kind of a couple of times in the very, very short term, but I think.

Given just how strong we've rallied, we went from an oversold condition to kind of an overbought condition in a pretty historically kind of fast in a very, very short period of time that we just need to kind of see a little bit of a reset and then you do have some positives beneath the market that are at play.

We are coming out of the tax returns, so you're starting to see the retail investors. reinvolved and we're kind of starting to come out of the buyback blackout window, so that should add a little bit of a stabilizing bid back in the market as you think about you have the mega tech companies that are in that window and they start to come out kind of in the next week or two.

So you should see a little bit of stabilization from that perspective as well.

Well, Michael, it is a big week.

So thank you so much for kicking off the trading week with us here on Fede.